Do Your Wages Reflect How Hard You Work? – Civic Skunk Works

Ask any Econ 101 student how employers determine worker wages and they’ll likely reply that pay is tied directly to productivity. Professors have told students for decades that employees who work more — who produce more profit for the company — will earn more in wages. If they don’t make more money, they can shop their talents to other employers. This, supposedly, is the wisdom of the free market at work, regulating wages so they correlate directly with how hard and how efficiently work gets done.

Of course, that explanation is bunk. It’s nonsense. It bears no relationship to reality.

American workers today are far more productive than workers forty years ago. The Economic Policy Institute says that workers in 2016 were 73.7 percent more productive than workers in 1973, but they didn’t earn 73.7 percent more than workers from 1973. In fact, they only earned about 12.5 percent more than the average 1973 worker.

So where does the rest of that money go? Why aren’t workers earning almost 75 percent more than the less productive workers of the past? Well, that money now goes directly to corporate profits.

So much for efficiency and wages.

Something is wrong with our current economic system. It’s downright bizarre that one American is worth over one hundred billion dollars while children have to raise money to get out of school lunch debt. (There’s even a Lunch Debt category on GoFundMe, which is the single most depressing fact I’ve learned today.)

Look at that chart above and tell me: is the problem that people aren’t working hard enough? We’re doing more work more efficiently than ever before, and corporate profits are higher than they’ve ever been.

And after Donald Trump and Paul Ryan passed tax cuts for corporations and the wealthiest Americans last year, corporate America responded with a meager slate of one-time bonuses that had very little to do with hard work. Some of the companies paid out larger bonuses to long-term employees, but many of the most-publicized bonuses seemed to be flat-rate pay outs to every employee, regardless of performance.

There’s only one conclusion to draw from this: American employers no longer buy into the concept that wages should reflect a worker’s productivity and efficiency. Instead, they throw in occasional flashy bonuses that bear no reflection to the reality of hard work.

I’ve lost track of how many people I know who have been handed insulting annual raises of 1.5 percent from apologetic managers who claim “that’s the most the home office will let me raise anyone’s pay this year.” These caps send a message to workers: there’s no incentive to work twice as hard, or even ten percent as hard, because next year’s raises will bear no relationship to the realities of their job.

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